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Cloud channel wars - Assessing the Aussie impact of Alibaba and Google

What happens when two of the most cashed-up tech companies on the planet unleash their cloud businesses on the local channel?

The shadow that the cloud has been casting over the local channel scene has grown long and deep. Like its namesake, its tendrils have been creeping their way into almost every nook and cranny of the Australian enterprise technology landscape.

Today, cloud technology is big business; one of the biggest in the entire IT industry. For local partners, it is a necessary area of competence. For vendors, it represents an essential step in long-term relevance.

But not all vendors are equal. Some have come a long way in establishing themselves as clear leaders in the global cloud market: Amazon Web Services (AWS), of course, Microsoft and IBM, while Oracle is making great strides to capture more of the cloud market.

While these players are already big names in the channel, others are still in the process of ramping up their presence.

Among the emerging contenders in the Australian cloud landscape are Alphabet, Google’s parent company, which launched its local Google Cloud Platform (GCP) in June, and Alibaba Cloud — known in China as Aliyun.

Both of these global players have extremely deep pockets with which to invest, and both are likely to become formidable cloud contenders in the local channel.

All in with Alibaba

In September 2014, Alibaba Group entered the record books, mounting what was at the time the largest initial public offering (IPO) in history.

The Chinese e-commerce company raised US$25 billion in its New York Stock Exchange float, attaining a market valuation of more than US$230 billion in the process.

The move not only ushered in the company into minds of the Western market, but also delivered it some serious funds with which to invest.

So, what does a tech company with a cool US$25 billion at its disposal do with all that cash? Quite a lot, it seems.

Now, almost three years after its IPO, Alibaba Group is dipping its fingers into an increasingly diverse array of technology offerings, include database systems, artificial intelligence, smart logistics and cloud computing, all while keeping the ship afloat thanks to its core e-commerce business.

While many of these technology offerings are yet to become fully-fledged businesses in their own right, the company’s cloud computing brand, Aliyun – or Alibaba Cloud in Australia and other markets internationally – is making enormous gains in the global tech landscape.

Cloud has been a clear growth area for Alibaba since at least 2009, when it established Alibaba Cloud as a subsidiary business.

Like other areas of its technology portfolio, Alibaba Cloud got its start supporting Alibaba Group’s existing platforms and activities, as well as powering services for its sellers and other third-party entities participating in its ecosystem.

However, in late July 2015, the company revealed plans to pump US$1 billion into the Alibaba Cloud business in a bid to accelerate the global rollout of its cloud computing footprint.

Now, the company claims to be the number one public cloud vendor in China, with 14 international data centres and at least 2.3 million customers globally — end customers include the likes of Schneider Electric, Philips and Nestle.

“Today, Alibaba Cloud hosts 35 per cent of total websites in China while also providing clients with cloud computing and big data services,” Alibaba Group founder and executive chairman, Jack Ma, said in a letter to shareholders in October last year.

“Alibaba Cloud is a company with cutting-edge technology and an extensive range of products and now ranks among the world’s top three cloud computing companies.”

From the very outset, the investment was not only aimed at expanding Alibaba Cloud’s international presence, but also to extend and support an alliance-based global cloud computing ecosystem.

One of the company’s initiatives aimed at building this ecosystem is its international Marketplace Alliance Program (MAP), which was launched in June 2015, and designed to provide global users with one-stop cloud services and contribute to the worldwide development of cloud computing.

The first wave of alliance partners included Optus parent company, Singtel, among others across North America, Asia, Europe, and the Middle East.

Two years later, and Alibaba Cloud’s worldwide data centre tally comes to at least 14, with one opening in Sydney in November last year, effectively launching the company’s cloud services in the local market.

It remains to be seen precisely how Alibaba Cloud intends to tap the local channel in its efforts to reach end clients, but the company claims that partners are a key part of its expansion in the local market.

“We recognise that only if we work with local partners here, we will see success,” Alibaba Group managing director of A/NZ, Maggie Zhou, said late last year.

“This includes the government, includes channel partners and businesses here. We are also very eager to bring Alibaba Cloud here in Australia to enable the young people, the SMBs and the start-ups.”

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Alibaba Cloud general manager of global business, Ethan Yu, went further, indicating that middle-sized and small-sized channel players will be the company’s preferred partners locally, while stressing that larger partners would not be neglected either.

“We are looking for channel partners that do not only have customer reach, but those who offer innovative solutions on top of Alibaba Cloud,” Yu said late last year.

While the company claims to be looking to engage the smaller end of the channel, as of November last year, it had only named Accenture among its signed Australian channel partners.

But the local market can expect to see many more partners come on board as the company shifts its channel ambitions in the local market into the next gear.

“We will have massive training facilities in Australia to train our end customers and channel partners and will have a certification program, just like AWS does,” Yu said in November.

Going Google Cloud

While Alibaba Cloud is taking its time to build up a channel presence despite having already launched in Australia, GCP has already spent quite a while making a splash among local partners, even though it only officially launched in Australia a month ago.

The company revealed plans in September last year to establish eight new Google Cloud Regions around the world, including Australia, with Sydney now accommodating three new availability zones.

To facilitate the move locally, Google has started the process of hiring top brass for its cloud business in Australia and New Zealand in early March.

Yet GCP has been used by Australian businesses for years. As of September last year, Google claimed its Cloud Platform served more than one billion end users. The contrast between Alibaba’s tentative foray into the local cloud market and GCP’s big, bold push into A/NZ can be attributed to each of the vendor’s existing cloud businesses.

And Google’s cloud business is farther ahead in terms of size and maturity. The company already has plenty of partners in the local channel, most of which have been simply provisioning existing Google Cloud services from the vendor’s international data centre footprint.

At the same time, the launch of GCP in Australia looks set to make a big difference for partners around what they will be able to offer customers.

One of the Australian channel players that is likely to see a surge of GCP adoption among its customers is Melbourne-based software consultancy, Shine Solutions Group, which partners with Google as well as market leader, AWS, in the cloud.

Shine Solutions specialises in bespoke enterprise-based software, with a customer tally that includes big names in the Australian market, such as ANZ, Coles, Telstra and National Australia Bank.

The company has been a Google partner for the better part of the past five years and, according to Shine Solutions Director, Luke Alexander, it is investing heavily in Google.

“Now a vendor of Google’s calibre has entered the market and is on the ground locally, we expect to see a spike in adoption,” Alexander said. “Most organisations have strict data policies when it comes to cloud so the introduction of the GCP will help open up new conversations.”

It remains to be seen what level of enterprise cut through GCP will get in the local market, given its existing consumer connotations. Yet the growing prevalence of offerings such as G Suite among businesses, combined with the company’s existing brand equity is likely to help it along.

But not everyone is convinced.

“Amazon was a trailblazer in retail and that certainly helped to open doors for AWS, and we expect the same with Google,” he said. “But there’s still scepticism when it comes to mixing an established consumer brand with an enterprise player.

“Google is doing a good job of explaining the key differences and are leveraging their security model to help drive adoption in the cloud.”

Regardless of the question over Google’s consumer reputation, some of the capabilities the company has built into its cloud offering are likely to represent a compelling alternative for local partners wanting to bring something new to their clients.

“It’s still early days in the cloud and early days for Google, but the machine learning play is a huge advantage,” Alexander said. “They have a competitive edge over other players in the market and we’re seeing AWS and Microsoft Azure respond to try and bridge that gap.”

Ultimately, Alexander believes the decision to sign up as a partner early has set the company up to be on the front foot now the tech giant has finally launched Google Cloud Platform in the local market.

“As a small organisation based in Melbourne with 80 staff, we’ve benefited enormously from joining the Google ecosystem early,” he said.